Deloitte has been fined £14m by the UK’s accounting watchdog over its role in
2000’s sale of MG Rover, the British car maker that collapsed in 2005.

The Financial Reporting Council (FRC) on Monday fined the accountancy firm and banned Maghsoud Einollahi, a former partner, from the industry for three years.

The fine is easily the largest levied by the watchdog, dwarfing the £1.4m PwC was ordered to pay in November 2011 over an audit of JP Morgan Securities.

It comes after an FRC tribunal found that Deloitte had failed to properly manage conflicts of interest when it was both administrators to MG Rover and advisers to the “Phoenix Four” group of directors that paid £10 to buy it from BMW in 2000.

Deloitte had contested the ruling but its appeal was rejected in July.

The directors – Peter Beale, Nick Stephenson, John Towers and John Edwards – paid themselves £42m before the Midlands-based company collapsed in 2005, leading to 6,000 job losses. The directors had agreed to award themselves bonuses while on holiday in Portugal one year after buying the company.

Deloitte has committed to paying the fine levied on Mr Einollahi, who was painted as the architect of the scandal. He has since retired.

The report said: “steps to ascertain whether or not there is a conflict... should be a continuing exercise throughout the work being done. In this case... it became apparent... that the Phoenix Four had decided that they wanted to secure the profits for themselves and not for [MG Rover].”

Paul George, the FRC’s executive director of conduct, called the report “essential reading for all members of the profession”.

“The sanctions imposed are in line with the FRC’s aim to ensure penalties are proportionate and have the necessary deterrent effect to prevent misconduct and bolster public and market confidence,” he said.

Deloitte said it disagreed with the case’s outcome and said it could have “negative implications” for the industry.

“The quality of our work, carried out more than 10 years ago, has not been criticised, but the tribunal found against us on a number of points. This could have negative implications for the advice that can be provided by [accountancy body ICAEW] member firms and members, both within the profession and business,” it said.